UNITED STATES - California State Teachers Retirement System CalSTRS) and First Industrial Realty Trust have moved their industrial joint venture program to Europe for the first time.
Its investment entity in Europe is called FirstCal Industrial Europe and will have a total capitalization venture is $475m (€319.6m).
The venture is financed through 65% debt and 35% equity, while CalSTRS contributed 90% of the equity, or $150m, and First Industrial 10% or $17m, so equity ownership of properties will be split in the same allocations.
Advised by CB Richard Ellis Investors, the venture is expected to invest in The Netherlands and Belgium, according to Gary Neumeier, senior managing director at CB Richard Ellis.
"For most of 2007, we had been looking at setting up a venture for Europe. This gives us more diversification by investing in a different part of the world. We think that we can achieve 10% higher returns with the European assets than we can on transactions in the United States. A big driver for this venture was that First Industrial has some tenants that it works with in the United States that want to move some of their industrial products in Europe."
It is expected FirstCal Industrial Europe will invest mostly in warehouse/distribution industrial properties, in regions such as Rotterdam, Amsterdam and the "Golden Triangle" in Belgium.
However, officials behind First Industrial believe the Port of Rotterdam - the largest container cargo seaport in Europe - could be a good investment as it has reported more than a 10% increase in volume over the past four years.
This will include buying land for new development projects and purchasing existing assets that can be improved through a renovation or releasing, to help generate 20% leveraged IRRs in a two- to three-year holding period.
CalSTRS and First Industrial have a three-year investment window in which to find all of the deals for the JV.
The two companies also recently expanded their relationship to Canada for the first time with the creation of FirstCal Industrial Canada, which has a total capitalization of $285m.
The Canadian venture will be active Toronto, Edmonton and Calgary in the purchase of land for new development and existing properties in need of improvement.